Bridging The Gap Between Theory & Practice

Dept of Business Economics, DU

Sep 14th, 2013

Agenda

• Why This Session ?

• Why Does A Business Exist ?

• What Is A Manager Supposed To Do ?

• Q/A | Feedback

Why This Session ?

Our Coursework Spans Multiple Subjects Chosen To Help Build Analytical Skills

MBE Curriculum – 2012 - 14

Real Life, However Is Vastly Different…

10%

25%

40%

65%

80%

90%

Manager Senior Mgr Gen Mgr VP Director EVP / CEO

0-3 3-6 6-9 9 + 12 + 15 +

"Do"

"Think"

Exp (Yrs)

Designation

Estimates for FMCG Industry Basis Own Experience / Hierarchy / Career Progressions

“Think” v “Do” : How Roles Define Operating Priorities

Creating A Disconnect Between The Real World & What We’ve Been Trained For

• Actual Usage of B-School Skills Starts 3-5 yrs down the line

• Initial exposure largely operational in nature

– Lack of big picture perspective

• Understanding “business” not a part of business school curricula

Why Does A Business Exist ?

Any Business Exists

To Design / Create Goods / Services

Which Can Be Sold To Consumers

At a reasonable Profit

A Constantly Ongoing Cycle…

An Organization Accomplishes This Through Various “Sub Organizations”

• Sales

• Marketing

• Finance

• Production / Operations

• Supply Chain

• R & D

• H R

Consumer

So What Do Sales & Marketing Really Do ?

Sales

• Ensures Product availability across markets

• At a reasonable cost

• Generates Revenue

Marketing

• Creates Consumer Mindspace

• Understands Trends

• Drives Innovation & product development

• Owns the bottomline

This Is How The FMCG Sales System Moves Goods From Factory To Outlets

Factory

Outlet Outlet Outlet

CFA CFA CFA

Distributor Distributor

Typical FMCG Structure : Varies By Industry

Component Financial Reward

CFA % commission on turnover

Distributor% margin on MRP

Outlet

Its Priorities Being…

• Increasing Distribution – Urban / Rural

– At the right outlets

• Ensuring Product Availability – Through regular market servicing

• Creating Sustainable, Long Term Partners

• Reducing Cost of Operations

• Measures of Reach : – Numeric Distribution (ND%) : No of outlets reached v/s outlet universe

– Weighted Distribution (WD%) : Reach within high salience outlets of the universe (AC Nielsen)

• Volume Growth (%)

• Market Share (%) (AC Nielsen)

• Revenue Growth (%)

• S & D Cost (% to Sales)

Which Are Measured By The Following Parameters

What Does Marketing Really Do ?

Sales

• Ensures Product availability across markets

• At a reasonable cost

• Generates Revenue

Marketing

• Creates Consumer Connect

• Understands Trends

• Drives Innovation & product development

• Owns the bottomline

Marketing Tries To Understand The Consumer, & Helps Create Demand

Consumer Connect

Understand Trends

Drive Innovation

Media : TV, Print , Internet, Social

Consumer Research, Macro Economics, Surveys

New Product Development, Packaging Innovation

Ad AgenciesMedia Agencies

Research Agencies

R & D, Packaging, Operations

Marketing Evaluates Its Communications Through

–Coverage Measures : • Reach

• Frequency

• TRP

• GRP

– Effectiveness Measures: • Recall Scores

• Affinity Scores

• 360 ⁰ Engagement With Business Functions

– Sales

– Production

– Packaging

– Quality Control

– Advertising

– Media

• Responsible for delivering the “bottom line”

Marketing Relies On Various Functions To Deliver Its Agenda

Gross Sales

a MRP 10

b Units Sold 100

c Gross Sales 1000 a x b

Net Sales

d Retailer Margin 10% 100 d x c

e Distributor Margin 6% 54 e x (c-d)

f Net Sales 846 c – d - e

Gross Profit

g Prodn + Dist cost per unit 6 600 g x f

h Gross Profit 246 f - g

Net Profit

i Mktng Expense 100

j Tax 10% 15 (h-i) x j

Net Profit 131 h – i - j

Marketing Delivers The Brand P & L

Ref : “What They Don’t Teach You About Marketing” : Ketan Joshi

So, How Does this “bridge the gap” ??

• Requirement for Better Business Decisions

• Business Expectation : B- School Graduates should help take “better decisions”

• Better Decisions are similar to scientific experiments – Fact Based

– Repeatable

– Scalable

– Are not Opinions !!

Better Decisions can result when skills and business understanding go hand in hand

• Data Analysis : – Pareto

• “Should we focus on growing my larger towns, or should I expand distribution in rural areas ?”

– Correlation : • “Is there a strong case to increase price offs during winter to drive sales basis historical

data ? “

• Financial Analysis : – Return on Investment

• “Is my distributor earning the committed ROI ? – What can I do increase it ? ”

– Contribution Margin : • “ Will discounting this low CM product result in higher volume and hence higher NR, or

should we discount the high CM product ?”

“How do all the actions taken by me affect my territory’s P& L ?

Summing Up

• Current Theoretical Models Explain Business Reality Partially

• “Big Picture” Business Sensitivity Needed To : – Perform current role effectively– Accelerate career progression

• Overview of Sales and Marketing Functions– Similar Concepts underlie other functions

• Marrying Theoretical Skill Sets To Business Expectations Leads to Better Decisions

What Does A Manager Do ?

Can we classify these as :

• Establishing Objectives

• Organizing

• Motivating

• Developing People

• Communicating

• Measurement & Analysis

Ref : Winnie The Pooh On Management : R.E. Allen

Leveraging the B- School Environment To Hone Operational Skills• Approaching Group Projects with the managerial mindset

– Appoint Project Leads– Swap roles – Work with different groups

• Sharpening Communication Skills– Powerpoint presentations :

• Andrew E Abela• Nancy Duarte• Garr Reynolds

• MS Excel : Your Best Friend – Advanced excel usage

• Juice Analytics• www.chandoo.org

• Management By Wandering Around

• Read, Read, Read !

References

• “What They Do Not Teach You About Marketing” – Ketan Joshi – Macmillan – 2009

• “Winnie – the – Pooh on Management” –Roger E. Allen – Penguin – 1994

Suggested Reading

The Effective Executive : Peter DruckerHarperBusiness; Revised edition (2006)

Managing Oneself : Peter Druckerhttp://hbr.org/2005/01/managing-oneself/

The Checklist Manifesto : Atul GawandePenguin – 2009

Romancing the Balance Sheet : Anil LambaNetwork 18 Publications – 2010

My Years With General Motors : Alfred P SloanCrown Business - 1990

Q / A

Thank You…

anshul.punetha@gmail.com